Tuesday, October 8, 2013

What's Next For The Poland Phenomenon? Lessons From Silicon Valley

Polish IT entrepreneurs operating in the U.S. met with
Polish President Bronislaw Komorowski and Deputy Economy Minister Ilona
Antoniszyn-Klik during the Polish politicians’ visit to New York for the U.N.
General Assembly meeting last week.

“Several years ago we could only dream that Polish
firms could be in Silicon Valley,” said President Komorowski, according to the
website of the office of the president of the Republic of Poland. “Today we
should have another dream—that we create a Silicon Valley in Poland.”

Over the last 25 years Poland has metamorphosed from a
gray, poor, post-communist country into a European economic powerhouse. It is
now the world’s 23rd largest economy, and Europe’s sixth largest. It is the
only country in the European Union that did not suffer recession during the
recent crisis, and the projected growth rate for 2014 is 57% higher than for
the EU as a whole.

Poland also has a very well educated population and
creative professionals. As an example, a Forbes Insights/ACCA study, “Nurturing
Europe’s Spirit of Enterprise: How Entrepreneurial Executives Mobilize
Organizations to Innovate,” concluded that Polish respondents were most likely
to say that they had championed an innovation. They were also most likely to
say that they had succeeded in getting the innovation implemented. Meanwhile,
UK, German and Swiss executives were least likely to say that they had proposed
an innovation.

Innovation is what Poland needs to move its growth to
the next level. Poland has creativity in spades. Still missing are the factors
needed for its implementation, such as financing for new ideas and
commercialization of university research. And, perhaps most important, what’s
also needed is a cultural shift in approach to risk taking. That’s where
cooperation with Silicon Valley can be helpful.

The country has been, however, lagging other European
countries in R&D investment, and it is ranked in 49th place on the Global
Innovation Index produced by INSEAD and WIPO (World Intellectual Property
Organization). There is clearly room for improvement.

It is the holy grail of all emerging markets to create
new, worldwide brands that would transform the countries into licensors and not
just licensees or subcontractors. That’s easier said than done. The proof of
just how difficult it is to create a global brand is the Forbes list of the 100
most valuable brands. Topped by Apple, a brand estimated by Forbes to be worth
$87 billion, and ending with Kleenex, which clocks in at $3 billion, the list
includes no brands from the European emerging markets.

Developing new technologies or designs depends on the
level of innovation in a given country or region. This in turn requires
openness of the economy and ease of doing business, pay incentives, financing
opportunities for entrepreneurs—such as angel investors and venture
capitalists—as well as an educational system fostering critical thinking.

Many of these factors, such as venture financing or
commercialization of university research, are at embryonic stages in Poland.
What’s most important, however, may be creating the right mindset for
innovation. In terms of Poland, this means more appetite for smart risk taking,
and eradicating the social stigma associated with making mistakes, said Marek
Belka, president of the National Bank of Poland, at a recent economic
conference at the Kosciuszko Foundation.

In terms of a business or professional reputation, in
Poland it’s very hard to bounce back from a bankruptcy or a professional
mistake, as these are often associated with fraud or incompetence. Such low
tolerance for failure makes for a reliable and stable society, as crooks,
incompetents or misfits find it hard to practice their trade again. As a
result, there are relatively few financial scandals or ethical breaches.

But this also means there is less opportunity for
second or third acts, and learning from mistakes, which is the only way to
innovate and move forward. For a Polish financier, investing in a startup
knowing that it’s got a 10% chance of succeeding would be hard to swallow. In
contrast, U.S. venture capitalists like to invest their money with people who
have participated in a failed startup before: the assumption is that they have
learned from their mistakes. The venture capital financing business is, after
all, a hits business, where one good exit such as Facebook can change the
fortunes of a firm and make irrelevant many other losses.

What Poland needs now is some of that Silicon Valley
spirit.

This is a repost of
an article that appeared on the Forbes website on October 1, 2013

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An English blog about Krakow Startup

Hello readers, My name is Paul Chen and welcome to K’Sup. My goal is to provide you an English language based blog on the events as well as highlight some of the enterprises who are trying to get their spot on the map as well as to archive the on-going activities at the same time do some trend-spotting. I hope you will find K’Sup both informative and inspirational. The name K’Sup is a combination of K for Krakow and S for start and UP. ‘Sup is colloquial for what’s up in American slang.